After more than four years of development, court challenges and rewrites, USDA this week proposed its new rules to bring U.S. BSE import/export regulations into line with the rest of the beef trading world. The new rule will bring U.S. rules into agreement with recommendations by the OIE, the world animal health organization, adopting the same criteria and categories for trading partner designations based on the BSE risk status of the trading country. It would allow USDA to begin trade negotiations on beef and beef byproducts, rendered products and related products with countries classified by OIE as controlled and negligible risk BSE status.

The U.S. enjoys "controlled risk" status. APHIS can apply the OIE recommendations or conduct its own evaluation, and some low-risk products, such as boneless beef, would be allowed into the U.S. regardless of the other country's status. No other changes are expected in current BSE programs, said Dr. John Clifford, USDA's chief veterinarian and deputy administrator of the Animal & Plant Health Inspection Service (APHIS) during a conference call with industry stakeholders. "This rule brings our regulations in line with the most current scientific data and harmonizes (U.S., rules) with OIE guidelines," Clifford said. He said the new rule will strengthen the U.S.'s hand when negotiating new trade agreements on beef with other nations. However, during the stakeholder call, R-CALF reiterated its strong opposition to the action taken by USDA, saying it was placing the U.S. cattle herd at risk. The rule is available for public comment for 60 days, and can be viewed at www.aphis.usda.gov.

Nitrate Report Released, Agriculture Contribution Documented

by: Dennis AlbianiCGFA Governmental Relations Advocate

This week a study revealed that nitrate levels are rising in the groundwater in the Tulare Lake Basin and Salinas Valley. Thereport was conducted by UC Davis and funded by the State Water Resources Control Board in response to state legislation.

The report found that groundwater moves very slowly from nitrate sources to drinking water wells. This means that the drinking water problem could continue for the next 10 to 30 years even if all sources of nitrates were completely eliminated today. If nothing is done to stem the problem, the report warns, nearly 80 percent of residents could be at risk of health and financial problems by 2050.

Nitrate contamination is a common problem among the world's agricultural regions. The researchers estimate that some 254,000 people in the study area drink water from wells with potential nitrate contamination. The public health risks include cancer and reproductive disorders. Nitrates in the drinking water could lead to thyroid cancer, skin rashes, hair loss, and birth defects.

Key findings include:

Actions to address the drinking water supply, including treatment and new water supplies, are most cost-effective. The problem is that well supplies will become less available as nitrate pollution continues to spread.

There is no single option that is a one-fix solution. Each affected area will require different solutions.

Fertilizers and animal manure are the key culprits in the rise of nitrates in the affected areas.

Nitrate reduction is possible, but the costs are likely high.

Directly removing nitrate from large groundwater basins is extremely costly and not technically feasible.

The association has been working closely with other ag entities to respond to the report including a discussion on all the proactive activities that have been implemented to reduce excess nitrate in the soil and groundwater.

Association Leaders Meet with Administration to Discuss Nitrates

by: Dennis Albiani

CGFA Governmental Relations Advocate

Association leaders met with administration officials to discuss nitrate management issues. Administration officials included Governor office officials Cliff Reichschaffen, Martha Guzman-Aceves, EPA Secretary Matt Rodriguez and Food and Agriculture Secretary Karen Ross. The agricultural coalition discussed the management actions that have been developed and implemented by California Agriculture. The dairy industry has a comprehensive nutrient management program including industry wide monitoring. Irrigated agriculture has been managing fertilizer with precision for years. Entities have been installing drip irrigation and using practices such as fertigation to apply fertilizer only in the root zone, testing soil nutrients prior to application and reducing applications only to plant needs. Additionally, in many communities, surface water for groundwater exchanges have provided a clean supply of drinking water and treatment facilities have been installed.

The agriculture coalition was asked to provide documentation of these activities and to continue to work with the administration to continue to identify options for nutrient management moving forward. The coalition has identified sources of existing funds for water quality programs and committed to continue to work with the administration to help implement additional actions to help find a solution to this serious issue.

Yesterday the Regional Water Board made a decision on the Central Coast conditional Ag waiver renewal, accepting the Conditional Waiver of Waste Discharge Requirements for Irrigated Agricultural Waste Discharges (staff recommended order) with some updates based upon Agriculture's comments on Wednesday and changes made in the final hour of the hearing by Board Member Michael Johnston. A few board members expressed interest in working on solutions with agriculture during the final hour of the hearing.

On Wednesday Agriculture submitted suggested changes to the staff report and the inclusion of "Part E", a section outlining a coalition approach. The staff had been directed to review all of Agriculture's proposed changes, and made some of them, excluding others. Generally, Part E as proposed was not suggested to be implemented as proposed by Agriculture, although pros and cons to the coalition approach were highlighted. This means that the coalition as proposed was not accepted, meaning that while growers may join a coalition if approved by the Executive Officer, that participation will not replace Tier 2 and Tier 3 requirements under the order, which was the primary intent.

At the end of the hearing, Board Member Mike Johnston presented suggested language updates to the staff report that would, among other things:

Allow Local or regional scale water quality protection and treatment strategies

Allow dischargers to continue to implement alternative treatment or monitoring programs approved by the Executive Officer as long as they demonstrate continuous improvement and sufficient progress towards water quality improvement based upon measurable indicators of pollutant load reduction. Dischargers may also seek review of Executive Officer decisions by the water board.

By October 1, 2012, Tier 3 Dischargers must initiate individual surface water discharge monitoring as set forth in MRP order No. R3-2011-0006-03, or alternative monitoring and reporting programs approved by the Executive Officer as set forth in finding 11 and condition 11.

By October 1, 2013 and annually thereafter, Tier 3 dischargers must submit individual surface water discharge monitoring data and reports per MRP Order No. R3-2011-0006-03, electronically, in a format specified by the Executive Officer, or alternative monitoring and reporting programs approved by the Executive Officer.

Dischargers may be moved to a lower Tier by forming a third party group to develop and implement alternative water quality management practices or cooperative monitoring and reporting programs. These projects would need to meet specific criteria (that's not well-defined) and these proposals would need to be reviewed by a TAC comprised of two researchers or academics skilled in agricultural practices and/or water quality, one farm advisor, one grower representative, one environmental representative, one environmental justice or environmental health representative, and one Regional Board staff member.

The staff proposal, with these and other amendments, is now fully in effect. The association will be reviewing next steps and communicating those to our membership shortly.

Legislature Hits Bill Introduction Deadline

by: Dennis AlbianiCGFA Governmental Relations Advocate

The introduction deadline for bills this year came and went with significant activity. This legislative session there have been 2661 Assembly Bills with 1228 being introduced this year, and 1573 Senate bills of which 625 are newly introduced. California is in the second year of two year legislative session. This creates a dynamic where we are working on bills introduced in 2011 that are still "alive" as well as new bills being introduced in 2012. Bills will start being heard in Committees next week. The legislative session will end on August 31, 2012.

Since there are so many bills, each week we have decided to highlight a few of the categories of measures that may impact your businesses.

Agriculture Transportation - Below is a group of bills that address various issues surrounding ag transportation including vehicles of husbandry, weight requirements and scale certification.

AB 1749 (Pan) Expand the definition of "pick-up truck" to include some larger flat bed vehicles used by a farmer or rancher or his employee for agricultural operations.

AB 1758 (Valadao) Adds "hay stack retrievers" to the classification of vehicles used exclusively for agriculture allowing them to qualify for some exemptions to fees and licensing requirements.

AB 1516 (Alejo) Increases the weight for agricultural vehicle that can be operated with a Class C license from 26,000 pounds to 28,500 and increase the length limitation to 75 feet.

AB 1518 (Perea) This measure would allow automated weighing systems for asphalt and paving materials. The author has asked agriculture if they would like to be included in this modernization of our weighmaster system.Food Processing "Cottage Industries" Below are bills that would focus on small food processors to help food processing "start up."

AB 1616 (Gatto) and AB 1915 (Alejo) SB 1106 (Strickland) These bills are attempting to provide a lower threshold on food safety requirements for "cottage food industries." This would allow small food processors to operate out of their home but give expanded authority for inspection and oversight of these operations.

CDFA Announces Vacancies on the Feed Inspection Advisory Board

The California Department of Food and Agriculture (CDFA) is announcing two vacancies on the Feed Inspection Advisory Board (FIAB). The FIAB makes recommendations to the Secretary of CDFA on all matters pertaining to the feed inspection and enforcement program, including the annual budget, necessary fees to provide adequate inspection services, and regulations required to accomplish the purposes of the California commercial feed law.

The vacancies are for commercial feed industry representatives; applicants should hold a current California Commercial Feed License with the CDFA. The term of office for board members is up to three years. Members receive no compensation, but are entitled to payment of necessary traveling expenses in accordance with the rules of the Department of Personnel Administration.

Individuals interested in being considered for the Board should send a brief resume no later than April 30,2012, to the CDFA, Feed and Livestock Drugs Program,

The regulation will reduce diesel exhaust emissions from privately owned and federal government diesel trucks and buses. Privately and publicly owned school buses have different requirements and do not need to be reported. We recommend that you use Microsoft Explorer or Mozilla Firefox to login and create an account. Other web browsers may not be compatible.

Smaller fleets can enter their information directly online. Larger fleets can use an upload spreadsheet to report vehicle information in batches rather than one vehicle at a time. Fleet owners who already created an account with the Tractor Trailer GHG reporting or the Off-Road reporting systems, can use the same user name and password.

Fifty-Five Members of Congress Sign Letter Calling for Labeling of GE Foods

Saying they were writing "in support of...over 400 organizations and businesses..." pushing for federal labeling of "genetically engineered foods," 55 members of Congress this week sent a letter to FDA Commissioner Margaret Hamburg saying it's time to end FDA's use of "19th century concepts to regulate 21st century food technologies." The letter calls into question FDA's GE foods policies, programs and approval processes, and scolds the agency for adhering to "an outdated GE food labeling policy by extending it to GE animals without revisiting the scientific or legal merits of the standard." The lawmakers say it is a "fundamental right consumers have to make informed choices... (and) labeling foods doesn't imply a product is unsafe or will be confusing to consumers." The politicians also argue that because 50 other countries require labeling of GE foods, the U.S. should as well. Opponents argue an agreement among federal agencies called "the coordinated framework" holds that foods are not labeled based on how they are made, but whether they present a "material difference" from a conventional product, or pose an allergenicity issue or other food safety challenge. Further, they say, given that nearly 85% of the U.S. corn crop and over 90% of the U.S. soybean crop is grown from genetically enhanced varieties - with more being adopted regularly - theoretically every food product with corn or soy ingredients would have to be labeled.

Committees Continue To Work On Farm Bill, But Needs a Commodity Group Agreement

Despite a continuing deadlock among national farm and commodity groups over how to replace federal direct payment programs, the Senate Agriculture Committee wrapped up this week its last Washington farm bill hearing (see story below), still dedicated to begin marking up a Farm Bill by the first week of April. However, the political challenge of getting a Farm Bill through House and Senate floor battles during an election year looms over both committees, prompting Sen. Pat Roberts (R, KS), ranking member of the Senate ag panel, to mention that if it looks iffy as to whether a stand-alone bill can survive floor action, the omnibus farm package could be attached to another "must-pass" bill.

The release this week by the Congressional Budget Office (CBO) of its calculations on how much money can be spent on a 2012 Farm Bill - and the frenzied calculations still underway - don't seem to have deterred the House or Senate ag panels from their agreed-to $23-billion target for cutting ag program spending, with some committee members reminding industry that if a bill isn't done in 2012, the cuts will likely be much deeper in 2013. It's also clear the Senate committee, and to an increasing degree, the House ag panel, appear to be starting at a "shallow loss" program approach, a three-tier program under which the federal government steps in to pay losses of less than 10-20%, those not covered by federal crop insurance or other disaster aid, and continues some subsidies based on target prices.

Most national commodity groups favor the shallow loss approach, but the American Farm Bureau Federation (AFBF) argues any new federal program should be geared toward the rare, but expensive, catastrophic loss situation. The AFBF plan - which president Bob Stallman admitted is "revolutionary" - would create a new federally subsidized form of crop insurance to cover losses of at least 20-30%, with payments based on historical levels and not current season prices as with conventional insurance. The plan would embrace several specialty crops for the first time, along with soybeans, corn, cotton, rice and wheat. AFBF says the good news is federal payments would be made less frequently; the bad new is the federal government assumes a greater share of the risk than it does under conventional crop insurance. Stallman acknowledged that Louisiana, Mississippi and Arkansas Farm Bureaus don't support the catastrophic approach based on regional and producer needs, but these state haven't proposed an alternative. He said AFBF is willing to look at other proposals in the interest of keeping the program development process moving forward.

For his part, House Ag Committee Chair Frank Lucas (R, OK) is moving away from a universal commodity program approach, acknowledging any income safety net reinvention "must...work for all regions and all commodities, but we've heard repeatedly a one-size-fits-all program will not work." He said the commodity title of the new Farm Bill "must give producers options so that they can choose the program that works best for them." Lucas has field hearings set for Illinois, Arkansas and Kansas through April 20. It's also known Lucas has instructed his staff to draft a one-year extension of the current Farm Bill if the 2012 effort goes off the rails.

At her last Farm Bill hearing this week before embarking on committee mark-up of a 2012 Farm Bill, Senate Agriculture Committee Chair Debbie Stabenow (D, MI) declared "the era of direct farm payment is dead," but also said the challenge is finding "the right mix" of program replacements to satisfy commodity groups. Commodity group witnesses told the committee that whatever it does, it cannot impose programs that interfere with a farmer's ability to decide what to grow and how much, that the new Farm Bill has to pave the way for younger farmers to get into business and that new programs can't create trade problems that trigger formal international actions. Producer group and government witnesses appeared to talk about the need for program reform, with farm witnesses declaring federal crop insurance must be the lynchpin for program reinvention, and USDA's witness, Michael Scuse, acting undersecretary for farm and foreign ag services, urging the committee to make only "simple and workable" changes to existing programs.

Given Stabenow's declaration and the efforts so far this year by the various commodity interests in rewriting farm programs, that request likely fell on deaf ears. The farm group witnesses opposed any spending cuts on crop insurance, reminding the lawmakers once again that the federal crop insurance program has absorbed $6 billion in budget reductions over the last 10 years. The rice industry witness, however, departed from the groupspeak on crop insurance, urging the committee to consider the damage that will be done to his industry if target prices and direct payments end. He told the committee rice growers don't benefit from insurance to the degree midwestern crop growers do, explaining production is irrigated and able to withstand drought, but not the added costs of pumping water into fields. Sen. John Boozman (R, AR) urged his committee colleagues to not write off target prices altogether, but was challenged by Sen. Mike Johanns (R, NE) who called the pricing scheme a bad idea, the exchange illustrating the regional differences that are the biggest challenge to rewriting direct payment programs.

Another contentious issue raised during the hearing was a proposal that conservation compliance program benefits be tied to crop insurance purchases, a move opposed by the American Soybean Assn. (ASA) and others. Roberts said the notion that ending direct payments ends conservation compliance is a "myth," but added a crop insurance hook could be added to other program eligibility.

The new U.S.-Korea Free Trade Agreement went into force March 15, and immediately agricultural equipment and two-thirds of U.S. ag exports to Korea were classified duty-free. Supporters of the new agreement contend it's the only way the U.S. can improve its trading relationship with Korea. USDA estimates that as other trade barriers are eliminated over time, U.S. ag exports to Korea should grow by $1.9 billion a year. The U.S. is now the fourth largest Korean trade partner behind China, the EU and Japan. USDA's ag trade office in Seoul, South Korea has launched a website with details for U.S. exporters, and can be accessed by going to http://www.atoseoul.com/fta/fta_page2_final.asp.

(see related article below)

U.S. Korea Trade Agreement Takes Effect

On Thursday, March 15th, implementation began for the landmark U.S.-Korea Free Trade Agreement (FTA), the product of years of collaboration by the business community and both governments. This is the biggest free trade pact the United States has reached since entering the North American Free Trade Agreement (NAFTA) in 1994. Congress approved the FTA on October 12, 2011. The South Korean Parliament followed suit on November 22, 2011.

Implementation of the U.S.-Korea FTA will eliminate tariffs and other barriers to trade in goods and services, promote economic growth, and enhance trade between the United States and Korea. For California, the FTA is a big win. Korea is California's fifth largest exporting destination for $8.4 billion of California exports in 2011.

With immediate removal of many of the tariffs, California exports will become more competitive and affordable to Koreans. In addition, tariffs and other barriers will be eliminated on most agricultural products produced in California. Korea is a $1.5 trillion economy and is the United States' seventh largest goods trading partner. Korea's commercial relationship with the United States is largely complementary. In 2011, two-way trade between the two countries totaled more than $100 billion. In 2011, U.S. goods exports to Korea were $43.5 billion, a steady increase over the previous five years.

The U.S. International Trade Commission estimates that with full implementation of the U.S.-Korea FTA, U.S. goods exports to Korea will likely increase by $9.7 billion-$10.9 billion and U.S. imports of goods from Korea will likely increase by $6.4 billion-$6.9 billion, enhancing the already-balanced trade partnership. The U.S.-Korea FTA will greatly expand market access in Korea for U.S. farmers, manufacturers, service providers, and financial services firms.

Under the FTA, more than half of current U.S. agricultural exports to Korea-with a value of more than $1.4 billion-became duty-free immediately, including high-value agricultural products such as almonds, pistachios, wine and cherries. For many other key agricultural goods, such as pork and citrus products, the FTA will provide unparalleled access to the South Korean market and its prosperous consumer base.

Almost 95% of all bilateral trade in consumer and industrial products will become duty-free within three years under the agreement, and virtually all remaining tariffs on consumer and industrial goods will be eliminated in 10 years.

The agreement also has important implications beyond bilateral trade and investment. By giving U.S. exporters and investors a preferential position in the world's 12th-largest economy (according to the IMF), an FTA with Korea enhances U.S. businesses' ability to compete in the dynamic Northeast Asia regional economy. From a strategic vantage point, the FTA reinforces the critical partnership and alliance between the United States and Korea.

The Senate this week approved a two-year, $109-billion highway reauthorization bill, and Senate Majority Leader Harry Reid (D, NV) called on House Speaker John Boehner (R, OH), who continues to struggle with getting his chamber's highway bill to the finish line, to bring the Senate-passed legislation to the House floor. The Senate bill is a political compromise in an election year between a conventional, high-priced five-year reauthorization of federal highway, infrastructure and urban commuter system programs and another continuance for few months or a year. The House is wrestling with a five-year, $260-billion bill, but cannot get House budget hawks to go along with the bill's funding mechanism. Boehner said his chamber will take up the Senate bill or something similar if he cannot get agreement on the committee-approved bill with offset provisions. And with the House on a district work break this week and the current highway program temporary extension expiring at the end of March, if Boehner doesn't act quickly, Congress may need to pass yet another short-term extension of current programs.

The Senate, during its final floor action on the bill, rejected an amendment by Sen. Debbie Stabenow (D, MI) that would have extended 19 expired renewable energy tax credits, including those for biodiesel and renewable diesel, along with a similar amendment by Sen. Pat Roberts (R, KS) that would have eliminated tax credits for renewable energy, expedited the Keystone pipeline, expanded domestic energy exploration and frozen federal employee wages through 2013. Roberts' amendment would have used the savings from his amendment to fund college tuition programs and other non-energy programs. Also successfully included in the Senate bill is language expanding the current hours-of-service exemption for farm trucks operating during planting and harvest and within 100 miles of their origin, as well as a separate action to allow farm vehicles to move across state lines without commercial drivers' licenses and other permits.

SACRAMENTO - Governor Edmund G. Brown Jr., Assembly Speaker John A. Pérez, Senate President pro Tem Darrell Steinberg and the Restoring California Coalition (the California Federation of Teachers, California Calls, the Courage Campaign and ACCE) joined forces on a new revenue initiative for the November 2012 ballot.

The new initiative integrates the Governor's original initiative with the Millionaires Tax Initiative. The new merged initiative is designed to balance the state budget, prevent further cuts to education, provide a progressive tax structure and provide constitutional protections of public safety realignment funding, with the following adjustments:

* Lowers the proposed sales tax increase from ½ cent to ¼ cent.

* Adjusts the top two upper income brackets from a 1.5% increase to a 2% increase for incomes over $600,000 for joint filers and from 2% to 3% for incomes over $1 million for joint filers. (The bracket for incomes over $500,000 for joint filers remains at a 1% increase).

* The income tax increases will be in place for an additional 2 years, through 2018, while the sales tax increase will still sunset after 2016.

"This united effort makes victory more likely and will go a long way toward balancing our budget and protecting our schools, universities and public safety," said Governor Brown.

"Our coalition welcomes the opportunity to join Governor Brown, Senate pro Tem Steinberg, Speaker Pérez and their allies in crafting this win-win measure," said Joshua Pechthalt, President of the California Federation of Teachers and a co-chair of the Millionaire Tax Campaign. "Our values and principles are clearly reflected in this new initiative that now includes a 50% decrease in the sales tax rate, reduces the burden on working families and ensures a greater contribution from the 1%. These changes will generate an additional $2 billion in vital funding for the next fiscal year, and we are determined to ensure those funds benefit the communities that have been hit hardest by budget cuts and our cash-strapped higher education institutions."

"This responsible agreement will ask less of those who were hit hardest in the recession while ensuring that those who have profited the most contribute a larger share," said Assembly Speaker John A. Pérez. "By reinvesting in our public schools and California's colleges and universities, I am confident that this proposal aligns with the values and priorities of the vast majority of Californians. This is a major step forward as we work together to put California on the right track while eliminating our structural deficit."

"Consensus speaks volumes when asking taxpayers for the resources to reinvest in education, higher education, public safety, and other vital services that keep people healthy and our economy strong," said Senate pro Tem Darrell Steinberg. "Californians recognize that we have cut far too much and demand better. Working together we can end our chronic deficits and put our state and the families that live here on the path to economic security."

The CGFA Annual Convention traditionally draws attendees from across the nation. It is an essential link in bringing greater communication and stability within the grain & feed industry. Your support and participation are invaluable in keeping our Association strong.

Highlights from the Business Session:

International Economic Considerations

by Michael Stead, EVP, Bank of the West

The Organic Food Market, How it Has Changed, Where it is Going, Who are the Customers

by Kelli Takikawa and James Parker, Whole Foods Market

CGFA Annual Meeting and Report

by President Chris Benevedes, Ridley Block Operations

and Executive Vice President, Chris Zanobini

UC Davis At Your Service - Connecting Academic Fire Power with Industry Needs

by Frank Mitloehner, Ph.D., UC Davis

Changing Consumers, Technology and Societal Values Regarding Modern Food Production

by Stan Erwine, Dairy Management Inc.

Group Luncheon Speakers

Matt Rush and Celeste Settrini ~ Matt and Celeste will be speaking about opening new doors for our industry...taking agriculture beyond the challenges we face today, and going forward with hope, determination and the spirit to succeed.